Prudent Risk Management + No Edge = Positive Expectancy??

Can you do my stats? tell me all about it; if it's random, performance stats, etc. You're the stats guy, so i'm curious to see what a statistician thinks.

 

Thanks for your response.

Agree. I looked up my old college statistics text book. With a win rate of < .54 a margin of error of 5% is from .49 to .59 which include the null hypothesis. I need to reduce my margin of error to 3%.

I am going to do what you suggested and calculate the win rates of the first 100, 200, 300...

Really appreciate your help.

 

Thanks for the offer.

Let me see if I can do this myself first.

I don't want to bother you unless I am stuck.

 

But the point is net profits, not comfort.

 

Goals are goals. Psyche is psyche. The two should intersect to be realistic.

 

Some of the best trades are often the most uncomfortable.

One can't get around that if they want to succeed.

 

Not worth it if it causes great anxiety, especially if there are other ways.

 

Think about the following:

1. A game that is exactly like a coin toss, 50/50 head and tail. Head I win $1, tail I lose $1.

2. It is Markov, meaning there is no memory or history, each toss is independent only depends on the current situation.

3. Every day, I play, keep tossing until I net $1, then stop. i.e., similar to a Martingale.

4. If I reach 10 tosses and loss $1, I quit.

5. Most day I win $1.

That is the essence of my system. The only edge is risk management.

Why do I think I have no other edge? Half a dozen times I made >30 trades and I loss 67% win 33% win $ and loss $ about the same, not much more than the notional $1. If the system has any real edge, the more I traded, I should accumulate a larger win $ which I did not.

Comments are welcome.

 

In a coin toss situation, the $ of win and the $ of loss are equal, there is no difference.
In trading, it's not the case, cause we're buying at the offer and selling at the ask. So the spread makes the $ for losses more than the $ for wins. On top of that, the market can move quickly making the difference even bigger.
And we're not even talking about commissions and trading fees.
And all the emotions and feelings that go with trading (fear, greed, FOMO, etc.).

 

I am going to remove one of the constrains, #3 and replace it with a fixed # of trades, run that for a few weeks and see the outcome. If the only edge is risk management, then the outcome will be random.

I decided to pick ~25 trades each day as contrast to ~10 each day in the current situation.